Farmers End Strike in Colombia

08 Mar 2013 06:53 EST DJ UPDATE: Colombia Coffee Farmers End Strike over
  Falling Prices --Coffee growers agree to end protests; government agrees to hike subsidies

--Drop in global coffee prices have cut Colombia farmers' earnings nearly   40%
--Two-week strike included roadblocks that caused food and fuel shortages

By Dan Molinski
 
BOGOTA--Colombia's government signed a deal Friday with coffee farmers   upset over falling bean prices, ending a two week strike which has included   violent protests and highway blockades.
 
"I celebrate this agreement with coffee growers," President Juan Manuel   Santos said on his office's website. The deal was signed by Agriculture  Minister  Juan Camilo Restrepo and other government negotiators, as well as
  representatives of the protesters, including the group's most-vocal leader,   Orlando Beltran.
 
Under the terms of the deal, the government will raise the subsidy for each   275 pound (125 kilogram) bag of parchment coffee to 145,000 pesos ($80). It   already raised the subsidy to COP115,000 last week from COP60,000 in hopes that   would end the strike, but farmers rejected it and continued to protest.
 
Local television images showed thousands of protesters beginning to clear   roadblocks Friday morning after hearing the deal was finalized. The roadblocks   led to food and fuel shortages in many towns and cities in the south. In the   border state of Narino the government was forced to import fuel from Ecuador as   some gas stations began price-gouging, reportedly charging up to $21 for a   gallon a gasoline.
 
The strike began Feb. 25 as farmers became fed up with Colombian coffee   export prices that have fallen nearly 40% since February 2012. The price paid   Thursday for a 275 pound bag was COP520,000; farmers say production costs  alone,  including labor and insecticide, amount to COP550,000 per bag.
 
Colombia is one of the world's largest coffee exporters and Latin America's   biggest producer of mild, washed arabica beans. Oil and coal long ago overtook   coffee as Colombia's main exports, but the sector remains a national treasure   and is the only source of income for about 560,000 families, most of whom pick
  the beans by hand on small plots of land. 
  
The government also said it would raise the subsidy to COP165,000 if prices   fall below COP480,000, in response to concerns that prices may fall even  further  over the coming months. Conversely, the government will stop paying if  the price  climbs significantly. It has set a maximum price of COP700,000.

 
Coffee farmers originally demanded the government agree to a guaranteed   "base price" for each bag of coffee of at least COP650,000. But the government,   apparently concerned global prices could fall even further, refused to make  such  an offer. "There will be no base price," the president's office said in   announcing the deal ending the strike.
 
The impact of lower prices has been worsened by the peso rising 10% against   the U.S. dollar last year, further squeezing farmers' already tight margins.  
  
Mr. Santos acknowledged that the subsidy, which now represents about 27% of   the market price, will require an "immense fiscal effort" this year for about   COP800 billion ($444 million).
 
Colombia is fiscally healthy following a years-long oil boom that has   provided a huge increase in tax revenue and consistently strong economic  growth.  The government expects a 2013 consolidated public deficit of around 1%  of gross  domestic product.
 
Write to Dan Molinski at dan.molinski@dowjones.com